Will Capital Gains Be Changed?

Currently, capital gains rates for the sale of assets held over one year are taxed at 15% (0% to the extent a taxpayer is in the 15% or lower regular tax bracket), compared with a top tax of 35% for ordinary income. Without Congressional action, these rates will increase to 20% (18% for assets held over 5 years) in 2013. Although there has been some discussion related to extending the 15% rates for another year (2013), to date, Congress has not provided any indication one way or the other. Even without providing guidance for 2013, the House Ways...

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Saver’s Credit Can Help You Save for Retirement

Low- and moderate-income workers can take steps to save for retirement and at the same time earn a special tax credit. The saver’s credit helps offset part of the first $2,000 that workers voluntarily contribute to traditional or Roth Individual Retirement Arrangements (IRAs), SIMPLE-IRAs, SEPs, 401(k) plans, 403(b) plans for employees of public schools and certain tax-exempt organizations, 457 plans for state or local government employees, and the Thrift Savings Plan for federal employees. Also known as the retirement savings contributions credit,...

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Keep Track of Meal & Entertainment Expenses

When looking for deductions to add to your taxes, don’t overlook your meal and entertainment expenses. These types of expenses must be “ordinary” and “necessary” to your business or trade and must be “directly related to” or “associated with” the active conduct of business. In order for the IRS to allow these deductions, documentation is required and should include the following items: The amount Date, time and place Business purpose Names of guests and business relationship In addition, the surroundings must be conducive for a business meeting,...

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Eldercare Can Be a Medical Deduction

With people living longer, many individuals find themselves becoming the care provider for elderly parents, spouses and others who can no longer live independently. When this happens, questions always come up regarding the tax ramifications associated with the cost of nursing homes or in-home care. Generally, the entire cost of nursing homes, homes for the aged, and assisted living facilities are deductible as a medical expense if the primary reason for the individual being there is for medical care or the individual is incapable of self-care....

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Are You Required to File 1099s?

If you use independent contractors to perform services for your business and you pay them $600 or more for the year, you are required to issue them a Form 1099-MISC after the end of the year to avoid facing the loss of the deduction for their labor and expenses. The 1099s for 2012 must be provided to the independent contractor no later than January 31 of 2013. It is not uncommon to, say, have a repairman out early in the year, pay him less than $600, and then use his services again later and have the total for the year exceed the $600 limit....

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Are We Headed for a Fiscal Cliff?

For several years now, Congress has left the taxpaying public hanging to the last minute with tax changes and extensions. And each year, the political gridlock seems to get worse, leaving taxpayers pondering how to plan their finances and businesses undecided about capital investments and hiring new employees, not knowing what the tax laws will bring in the next year. This year is even worse: It seems that our politicians have put on the back burner a whole host of tax issues that have expired or are going to expire in the near future, once again...

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December 2012 Due Dates

December 2012 Individual Due Dates December - Time for Year-End Tax Planning December is the month to take final actions that can affect your tax result for 2012. Taxpayers with substantial increases or decreases in income, changes in marital status or dependent status, and those who sold property during 2012 should call for a tax planning consultation appointment. December 10 - Report Tips to Employer If you are an employee who works for tips and received more than $20 in tips during November, you are required to report them to your employer...

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Don’t Be a Victim!

As the tax-filing season approaches, the identity thieves are gearing up with tax scams to sucker you into providing them with your identity information, which they can then use to charge against your credit cards, tap your bank account, steal your tax refund, file a fraudulent tax return in your name . . . the list goes on and on. These thieves are clever, and some even disguise e-mails to look as if they come from a government agency; the IRS banner has been used in many scams to steal taxpayer identities. For example, you may receive an e-mail...

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Fine-Tuning Capital Gains and Losses

The year’s end has historically been a good time to plan tax savings by carefully structuring capital gains and losses. Let’s consider some possibilities. If there are losses to date − As an example, suppose the stocks and other capital assets that were sold during the year result in a net loss and that there are other investment assets still owned by the taxpayer that have appreciated in value. Consideration should be given to whether any of the appreciated assets should be sold (if their value has peaked), thereby offsetting those gains with...

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Year-End Tax Planning Moves for Businesses

As the end of the year approaches, many are looking for ways to reduce their business profits before year’s end. Here are some possible moves that might apply to your situation. Self-employed Retirement Plans – If you are self-employed and haven't done so yet, you may wish to establish a self-employed retirement plan. Certain types of plans must be established before the end of the year to make you eligible to deduct contributions made to the plan for 2012, even if the contributions aren’t made until 2013. You may also qualify for the pension...

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Year-End Tax Planning Moves for Individuals

Uncertainty dominates year-end tax planning this year. Unless Congress acts, the Bush-era tax cuts will expire and bring higher tax rates and the loss of many deductions and credits starting in 2013. More individuals will be snared by the alternative minimum tax, which has not been patched for 2012 as it has for many years in the past. Even with the uncertainty, there are actions you can still take before the end of the year that can save a considerable amount of tax. Not all actions recommended in this article will apply to your particular situation,...

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November 2012 Due Dates

November 2012 Individual Due Dates November 13 - Report Tips to Employer If you are an employee who works for tips and received more than $20 in tips during October, you are required to report them to your employer on IRS Form 4070 no later than November 13. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the...

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Reap the Tax Benefits of Education Planning

The tax code includes a number of incentives that, with proper planning, can provide tax benefits while you, your spouse, or your children are being educated. Education Financing – A major planning issue is how to finance your children’s college education. Those with substantial savings simply pay the expenses as they go, while others begin setting aside money far in advance of the education need, perhaps utilizing a Coverdell account or Sec. 529 plan. Others will need to borrow the funds, obtain financial aid, or be lucky enough to qualify...

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Inheritances Can Be Tricky

If you have received an inheritance or anticipate receiving one in the future, this article may answer many of your questions. The process of claiming an inheritance can be quite complex and it helps to understand the basics and to be aware of potential tax liabilities. An inheritance is generally received after all applicable taxes have been paid along with any outstanding liabilities the decedent may have had. Exactly how the estate is handled will depend upon whether the assets were owned individually or in a trust. Without going into the intricacies...

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Haven’t Filed an Income Tax Return?

If you have been procrastinating about filing your 2011 tax return or have other prior year returns that have not been filed, you should consider the consequences. Taxpayers should file all tax returns that are due, regardless of whether or not full payment can be made with the return. Depending on an individual’s circumstances, a taxpayer filing late may qualify for a payment plan. All payment plans require continued compliance with all filing and payment responsibilities after the plan is approved. Facts about Filing Tax Returns Failing to...

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What's Best, Tax-Free or Taxable Interest Income?

A frequent taxpayer question is whether it is better to invest for tax-free or taxable interest. Generally, taxable interest will provide a greater return, but this may not hold true after taking into account taxes on the income. Therefore, the question is really which provides the greater "after-tax" return. Making a decision will take on another layer of complexity for higher-income taxpayers beginning in 2013 when the new surtax called the Unearned Income Medicare Contribution Tax is imposed on the unearned income of individuals, estates,...

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Assisting Your Child to Acquire a Home

If you are a parent who wants to assist your child in obtaining his or her first home, there are a number of ways you can help. Help with the down payment - Real estate lending laws generally will not allow the parents to loan the down payment on the home, since that is considered part of the debt. However, you can make an outright gift of the down payment. Just keep in mind that to avoid reducing your lifetime gift tax exclusion and filing a gift tax return, the gift cannot exceed the annual $13,000 gift tax exemption. If you are married, the...

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October 2012 Due Dates

October 2012 Individual Due Dates October 10 - Report Tips to Employer If you are an employee who works for tips and received more than $20 in tips during September, you are required to report them to your employer on IRS Form 4070 no later than October 10. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for...

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Planning Your RMD and IRA Distributions For 2012

We spend most of our lives saving for retirement by putting funds away in tax-advantaged ways. But many of us forget about planning the withdrawals so that they are tax-advantaged as well. Although there are exceptions, retirement funds generally cannot be withdrawn until we are age 59.5. If taken out sooner, there is a 10% penalty that applies in most cases. In addition, there may be a state penalty. A large number of taxpayers do not take distributions until they are forced to do so at age 70.5, not realizing they might benefit tax-wise by...

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Naming Your IRA Beneficiary – More Complicated Than You Might Expect

The decision concerning whom you wish to designate as the beneficiary of your traditional IRA is critically important. This decision affects the minimum amounts you must withdraw from the IRA when you reach age 70-1/2, who will get what remains in the account after your death, and how that IRA balance can be paid out. What's more, a periodic review of whom you've named as IRA beneficiaries is vital to ensure that your overall estate planning objectives will be achieved in light of changes in the performance of your IRAs and in your personal, financial,...

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Renting Your Vacation Home

If you own a home in a vacation locale – whether it is your primary residence or a vacation home – and are considering renting it out to others, there are complicated tax rules, referred to as the “vacation home rental rules,” that you need to be aware of. Generally, the tax code breaks a “vacation rental” into three categories, each with a different treatment for income and expenses: Rented Less Than 15 Days – If you rent your home for less than 15 days during the tax year, the tax code says that you do not need to report the income and you...

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Bunching Your Deductions Can Provide Big Tax Benefits

If your tax deductions normally fall short of itemizing your deductions or even if you are able to itemize, but only marginally, you may benefit from using the “bunching” strategy. The tax code allows most taxpayers to utilize the standard deduction or itemize their deductions if that provides a greater benefit. As a rule, most taxpayers just wait until tax time to add everything up and then use the higher of the standard deduction or their itemized deductions. If you want to be more proactive, you can time the payments of tax-deductible items...

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Important Times to Seek Assistance

Waiting for your regular appointment to discuss current tax-related issues can create problems or cause you to miss out on beneficial options that need to be timely exercised before year-end. Generally, you should call this office any time you have a substantial change in taxable income or deductions. By doing so, we can advise you about how to optimize your tax liability, avoid or minimize penalties, estimate and pre-pay required taxes, document deductions, and examine and explore tax options. You should call this office if you or your spouse: Receive...

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September 2012 Due Dates

Individual Due Dates September 1 - 2012 Fall and 2013 Tax Planning Contact our office to schedule a consultation appointment. September 17 - Estimated Tax Payment Due The third installment of 2012 individual estimated taxes is due. Our tax system is a “pay-as-you-go” system. To facilitate that concept, the government has provided several means of assisting taxpayers in meeting the “pay-as-you-go” requirement. These include: Payroll withholding for employers; Pension withholding for retirees; and Estimated tax payments for self-employed...

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Take Advantage of Education Tax Benefits

The tax code includes a number of incentives that, with proper planning, can provide tax benefits while you, your spouse, or children are being educated. Which of these options will provide the greatest tax benefit depends on each individual’s particular circumstances. The following is an overview of the various possibilities. Student Loans—A major planning issue is how to finance your children’s education. Those with substantial savings simply pay the expenses as they go while others begin setting aside money far in advance of the education need,...

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Middle-Class Tax Cuts: Will Congress Act Soon?

So who does President Obama see as the middle class? He has repeatedly used earnings of $250,000 for married couples and $200,000 for single individuals as the threshold for what he considers the wealthy and those who should not benefit from tax cuts. He reiterated that on July 9 by calling for a one-year extension of the Bush-era tax cuts for those earning under $250,000 per year. However, the Republicans continue to insist on a one-year extension for all taxpayers. The Republicans argue that no one should see a tax hike this year, not families,...

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